What Is Credit and Debt Counseling in Bankruptcy?
Credit Counseling: The “First” Course
Before filing for bankruptcy, you must be certain that it is the best option, as it can have serious and long-lasting effects on your credit, possessions, and income. The first course, pre-filing credit counseling, helps you determine whether bankruptcy is the best option. In this course, you will evaluate your financial situation and investigate alternative repayment options. If, after completing the course, it still makes sense to file for bankruptcy, you will submit a certificate of course completion along with your petition and schedules to demonstrate that you fulfilled the education requirement (the official paperwork that initiates the case). You can take the course online or over the phone and most people complete it in an hour or two.
Educating Debtors: The “Second” Course
You’ll take the post-filing debtor education course (or “second” class) after you file your bankruptcy. The second course will provide you with financial management tools that you’ll be able to rely on after your bankruptcy is over.
In a Chapter 7 bankruptcy, you must file your completion certificate with the court no later than 60 days after the date first set for the 341 meeting of creditors (the hearing that all bankruptcy filers must attend) (the hearing that all bankruptcy filers must attend). The court will remind you by sending a notice entitled “Notice of Requirement to File a Certification of Completion of Course in Personal Financial Management.” Chapter 11, 12, and 13 filers can submit the completion certificate anytime before making the final payment under the repayment plan.
Not only is it easy to forget to complete the coursework, but failure to submit the certificate will result in a fine. The court will dismiss your lawsuit without discharging (wiping out) your qualifying debt, and you’ll have to refund the filing fee to reopen it. Worse yet, in many courts, you won’t be able to file the certificate until you file a motion asking the court to accept the late-filed certificate and the judge grants your request (and you might have to file an additional motion asking for your discharge) (and you might have to file an additional motion asking for your discharge).
Who Must Complete the Courses?
All individuals who file a Chapter 7, 11, 12, or 13 bankruptcy must complete a credit counseling class and a debtor education training course before receiving debt relief—even if the individual’s debts are primarily business debts.
This regulation involves a husband and wife filing jointly (together) (together). Each must satisfy the condition. In contrast, business entities are exempt, including partnerships, limited liability companies, and corporations.
You might be exempt from the requirement if you must file an emergency case, or you’re in a military zone. Nevertheless, such exceptions are uncommon.
To find a course that fits the requirements of the courts in your bankruptcy jurisdiction, visit the U.S. Trustee’s website and select from a list of recognized providers.